Assessee wins appeal against disallowance of interest paid to creditors

The ITAT allowed the appeal of the assessee, directing the deletion of the addition made by the AO for the disallowance of interest paid to creditors. The ITAT found that the AO had not conducted an independent inquiry into the non-charging of interest on debtors by the assessee, and citing legal precedents, concluded that no addition could be made on this ground.

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Issues:
- Disallowance of interest paid to creditors
- Charging of interest under sections 234B and 234C of the IT Act
- Additional or alternative grounds for appeal

Analysis:
1. The appeal was filed against the order confirming the disallowance of interest paid to creditors by the ld. CIT(A) for the assessment year 2013-14. The appellant argued that the disallowance lacked a solid base and should be deleted. The hearing was conducted via video conference due to the Covid-19 situation.

2. The assessee, an individual and proprietor of a business dealing in grains, gaur, and agriculture products, filed the return of income declaring total income. The AO completed the assessment, making various additions, including disallowance of interest paid to creditors.

3. The ld. CIT(A) partially allowed the appeal, confirming the disallowance of interest. The appellant then appealed to the ITAT challenging the disallowance of interest amounting to Rs. 8,89,780.

4. The main contention was the non-charging of interest on debtors by the assessee. The appellant argued that the parties were related to business transactions and commercial expediency, and no interest was charged as they were regular dealers. Various legal precedents were cited to support the argument against the addition.

5. The ld. DR supported the lower authorities' orders, while the assessee reiterated their arguments before the ITAT.

6. After considering the contentions and evidence, the ITAT found that the AO had not conducted an independent inquiry into the non-charging of interest on debtors. Citing legal precedents, including the Supreme Court's decision, it was concluded that no addition could be made on account of non-charging of interest by the assessee. Therefore, the ITAT directed to delete the addition, allowing the appeal of the assessee.

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